BlueRock Diamonds* (LON:BRD) 3.9p, Mkt Cap £2.2m – Crushing circuit commissioned
Kefi Minerals* (LON:KEFI) 0.3p, Mkt Cap £13.2m – Chairman’s statement
Mkango Resources* (LON:MKA) 3.6p, Mkt Cap £3.0m – Workplan for Songwe Hill and Thambani
Thor Mining (LON:THR) 0.8 pence, Mkt Cap £2.8m – Resource drilling at Pilot Mountain
The US$ index rallied strongly with government bond yields climbing yesterday as New York Fed President William Dudley said that the case for an increase in interest rates is “a lot more compelling”.
• Dudley comments join previous hawkish remarks by Presidents of Dallas and San Francisco Feds.
• The probability of a rate hike in Mar has gone up to 80% compared to 38% as of last week.
• US equities had a muted response to the Trump speech at Congress with little details provided on proposed fiscal reforms, foreign goods taxes and financial sector regulations.
• Dow and S&P 500 closed slightly lower on Tuesday.
• Base metals are gaining on better than expected Chinese Feb manufacturing and services data with gold off $10/oz on the back of the stronger US$.
• Brent is flat ahead of the report expected to show US inventories climbed last week.
US - infighting over Trump’s move to repeal Obamacare threatens to delay other Trump initiatives
• US policy watchers were disappointed last night by a Trump speech which was said to be short on detail.
• Trump is keen to reform and reduce taxes on the middle class, to cut the cost of the administration and to roll back legislation which has held back the development of US industry
• But with infighting over ‘health’ the speech gave little on the move to new infrastructure development and deregulation.
• Delays to new infrastructure spending in the US and the implementation of tax cuts may well allow the Federal Reserve to push back the next rise in interest rates contrary to William Dudley’s comments above.
China plans Rmb2.6tr (378bn) of infrastructure investment 2017 as part of its Rmb15tr five-year plan for transport infrastructure
• China Economic Net reports that China plans on spending some Rmb2.6tr on transport infrastructure this year.
• The figures are said to include 800bn on the railways, 1.65tr on roads and 150bn on waterway transport.
• China’s 13th Five-year Plan which runs from 2016-2020 budgets Rmb15tr for transport infrastructure projects, including Rmb3.5tr on railways, Rmb7.8tr on roads and Rmb500bn yuan on waterway transport.
• Following the completion of these projects, China should have added 30,000km of rail with more than one third high-speed rail + 320,000km of road and 50 new civil airports.
• The aim is to have upgraded China’s transport infrastructure to something that is safe, convenient, efficient and green by 2020.
• China is also looking to have some 200,000 new energy buses running more than 160,000 already running.
• By comparison Crossrail in the UK has a cost of £15bn for 42km of rail and the cost of adding a third runway to Heathrow is estimated to be around £18.6bn and we are still arguing over who is going to pay the bill.
• HS2 (UK) is £55.7bn for 192km while the California High Speed Rail project is $68.4bn for 837km.
• Comparing the average budgeted cost of new rail is US$16.9m/km in China vs US$441m/km for Crossrail (UK) and US$82m/km for the California link.
• The World Bank reckons the cost of new high speed rail in China costs US$17-21m in China including a high ratio of viaducts and tunnels vs US$25-39m/km in Europe and US$56m/km estimated in California.
Lithium – Codelco to decide by end March on a partner to help develop its lithium assets in Chile
• The Codelco ceo commented that the big players in the industry are interested.
• Codelco is sticking to a reduced $18bn capital investment plan cut from an earlier $25bn proposal which was said to be unworkable from a management time perspective. The capital investment is assumed to be almost exclusively for copper.
Dow Jones Industrials -0.12% at 20,812
Nikkei 225 +1.44% at 19,394
HK Hang Seng +0.15% at 23,776
Shanghai Composite +0.16% at 3,247
FTSE 350 Mining +1.51% at 16,335
AIM Basic Resources -1.41% at 2,654
Economic News
US – Second Q4/16 GDP reading confirms the headline growth pace, but showed a slight change in the composition of an increase.
• Consumer spending growth revised upwards making it an even stronger driver of expansion of total output in the final quarter of 2016.
• Excluding household consumption (+2.1pp contribution to +1.9% GDP growth), GDP saw a modest decline (-0.2pp contribution from other segments).
• Business investment contracted while net exports weighed on GDP on the back of a strong US$.
China – Positive production numbers released this morning showing a pick-up in growth in both manufacturing and services sectors.
• Manufacturing recorded an acceleration in growth in both output and new orders which bodes well for a near-term outlook.
• “Looking ahead, manufacturers signalled the strongest degree of optimism towards future output growth since May/15,” Markit (private data) wrote.
• Overseas demand for Chinese goods is recovering with new export business rising at the fastest pace sice Sep/14.
• Inflation in input costs “remained sharp which prompted firms to raise their prices charged”.
• Manufacturing PMI (state data): 51.6 v 51.3 in Jan and 51.2 forecast.
• Services PMI (state data): 54.2 v 54.6 in Jan.
• Manufacturing PMI (private data): 51.7 v 51.0 in Jan and 50.8 forecast.
Germany – Unemployment contracts while inflation picks up, Feb economic numbers show.
• States-level data showed consumer prices growth accelerating to the strongest level in years with a nationwide number due later today.
• CPI (EU Harmonised; %mom/yoy): 0.6/2.1 forecast v -0.8/1.9 in Jan.
• Unemployment contracted by 14,000 to 2.59m people keeping the jobless rate at 5.9%, the lowest level since reunification.
• Given positive manufacturing and services industries sentiment surveys released earlier and strengthening labour market the economy is likely to have performed in line with the central bank predictions saying that growth strengthened in Q1/17.
• Unemployment: (-14k) 5.9% in Feb v (-25k) 5.9% in Jan and (-10k) 5.9% forecast.
Currencies
US$1.0536/eur vs 1.0588/eur yesterday. Yen 113.51/$ vs 112.44/$. SAr 13.097/$ vs 13.014/$. $1.237/gbp vs $1.243/gbp.
0.767/aud vs 0.768/aud. CNY 6.879/$ vs 6.870/$.
Commodity News
Precious metals:
Gold US$1,245/oz vs US$1,252/oz yesterday
Gold ETFs 58.9moz vs US$58.8moz yesterday
Platinum US$1,025/oz vs US$1,030/oz yesterday
Palladium US$777/oz vs US$786/oz yesterday
Silver US$18.35/oz vs US$18.31/oz yesterday – Fresnillo, the Mexican silver miner, shares continue to gain on a weaker Mexican Peso following further Trump comments
Base metals:
Copper US$ 6,035/t vs US$5,913/t yesterday – Codelco chief expects more difficult labour negotiations at its giant El Teniente copper mine next year
• Codelco will not be looking to accelerate development projects amid a pick-up in copper prices , Chairman Oscar Landerretche said.
• Copper prices are expected to average $2.6-2.7/lb in 2017 amid supply disruptions and a healthy demand; whereas, prices to move towards $3.0/lb in longer-term as the market to move into a deficit with a 100-200kt shortfall forecast in 2018, Codelco said.
• Grasberg partly restarts operations to supply concentrate to a domestic smelter which is expected to run at 40% of the plant capacity while the dispute between Freeport and local authorities over changes to the operations’ license continues.
• Exports of concentrate will remain suspended as the Company halted concentrate shipments last month.
Aluminium US$ 1,929/t vs US$1,899/t yesterday
Nickel US$ 11,045/t vs US$10,945/t yesterday
Zinc US$ 2,866/t vs US$2,820/t yesterday
Lead US$ 2,269/t vs US$2,260/t yesterday
Tin US$ 19,255/t vs US$19,240/t yesterday – Timah (Indonesia) sees tin prices at $20,000-22,000t this year (Reuters)
• Timah reckon there is a chance for tin demand and prices to improve if Trump policies are implemented.
• Our view is that given ongoing levels of activity in China and Asia that delays to Trump’s expansionist policies may become less significant
Energy:
Oil US$56.4/bbl vs US$55.8/bbl yesterday
Natural Gas US$2.767/mmbtu vs US$2.690/mmbtu yesterday
Uranium US$23.00/lb vs US$22.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$84.9/t vs US$88.6/t – iron ore prices pull back as China authorities investigate iron ore futures trading
• Investigation in China is a euphemism, for the authorities don’t like the price rise and they are going to hit anyone they see as helping prices higher
• We see prices as driven as much by the change in iron ore market dynamics as by speculators, as investors and traders generally trade on drivers in the underlying market.
• While action by the authorities are pulling back iron ore prices this does not serve to change the underlying dynamics of the market although capacity cuts in steel may have some impact.
Chinese steel rebar 25mm US$578.7/t vs US$580.7/t
• A number of steel mills have cut production lately as the government sent out the order to curb capacity to 28 northern cities during the heating season running from Nov to Mar.
• Sentiment seems to be turning as indicated by steel industry PMIs.
• The Steel Industry PMI which measures the sector’s performance registered an expansion in activity in Feb for the first month in three while production is reported to have climbed following four months of contraction, according to the National Bureau of Statistics data.
• China Steel Industry PMI: 51.4 v 49.7 in Jan.
• China Steel Output: 50.4 v 48.6 in Jan.
Thermal coal (1st year forward cif ARA) US$67.0/t vs US$67.7/t yesterday – Spain cut thermal coal use by 23% last year to 14.6mt.
• Coal is being displaced by hydro, nuclear and renewables with new gas generation replacing coal in the energy gap.
• Spain imported 12.9mt of thermal coal last year with domestic coal now less than 2% of the mix in power stations.
Premium hard coking coal Aus fob US$161.3/t vs US$160.1/t
Tungsten – APT European prices $197-207/mtu (from the 24Feb/17 week)
Company News
BlueRock Diamonds* (LON:BRD) 3.9p, Mkt Cap £2.2m – Crushing circuit commissioned
• BlueRock reports it has commissioned its primary crushing and screening circuit demonstrating target plant capacity.
• Unusually high rainfall in recent weeks in the Northern Cape has delayed the move to continuous processing though the rain is very welcome as it refills dams, rivers and waterholes following a long period of drought in the region.
• The delay to continuous processing unfortunately pushes out the return to diamond sales and cash flow.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds
Kefi Minerals* (LON:KEFI) 0.3p, Mkt Cap £13.2m – Chairman’s statement
• Kefi Minerals’ Chairman, Harry Anagnostaras-Adams provides a round-up of progress on the flagship Tulu Kapi gold project in Ethiopia and on the company’s wider exploration activities both within Ethiopia and in Saudi Arabia. The Tulu Kapi project underpins Kefi’s “solid progress towards becoming a gold production company.”
• Mr Adams notes the important milestones for the coming year as “those required to trigger development of the Tulu Kapi Gold Project” including the conclusion of the shareholder agreements and “detailed contractual arrangements with mining and plant contractors, credit approvals and regulatory approvals for the planned debt and mezzanine finance at the project level” as well as the implementation of the community resettlement plans by the regional Government.
• Highlighting the close and developing working relationship with the Government of Ethiopia, he pointed out that as well as the Tulu Kapi development, “the Government has also encouraged KEFI to plan an ambitious exploration program in the district around Tulu Kapi and elsewhere in Ethiopia. Targets have been identified for both satellite gold deposits and stand-alone development projects.”
• The projected all in sustaining costs of under US$800/oz “places it [Tulu Kapi] in the best quartile globally.”
• The Saudi Arabian Government’s review of its minerals regulatory regime has enabled Kefi Minerals “to upgrade our pipeline of targets in a discreet and low-key manner via our Gold & Minerals joint venture company (“G&M”) with 60% partner Abdulrahman Saad al Rashid and Sons”, and in the nearer term the company is focussed on the near term development potential of the precious and base-metals at Jibal Qutman and Hawiah.
Conclusion: Kefi Minerals faces a busy time as it continues to advance the Tulu Kapi Gold Project, however, it is clear that it will also be busy expanding its footprint in Ethiopia, where it has built strong connections at Government level as well as progressing its projects in Saudi Arabia.
*SP Angel act as Nomad and broker to Kefi Minerals
Mkango Resources* (LON:MKA) 3.6p, Mkt Cap £3.0m – Workplan for Songwe Hill and Thambani
• Following the recently announced agreement with the major commodity trader, Noble Metals to collaborate on marketing, logicstics and strategy, Mkango Resources has updated the market on its forthcoming work plans for its Songwe Hill rare earths project and Thambani uranium project in Malawi.
• The preparatory work at Songwe Hill has been completed and the company plans to start further test work to enhance the flotation and hydrometallurgical sections of the flowsheet with the results potentially identifying opportunities to reduce costs in the processing plant design.
• The company is also working with the Camborne School of Mines as part of the “SoS RARE” project which “aims to understand the mobility and concentration of Nd [neodymium] and HREE [heavy rare earth elements] in natural systems, and to investigate new processes that will lower the environmental impact of REE [rare earth element] extraction and recovery.” This work, in our view, could help in addressing environmental permitting issues as well as identifying further opportunities to refine the treatment process at Songwe Hill.
• The company is also starting its 2017 field exploration at the Thambani uranium project. Key elements of the previously announced programme include “mapping, soil and rock chip sampling, trenching and ground truthing of new geophysical anomalies.”
• Chief Executive, William Dawes, highlighted the growing momentum of the rare-earths sector as growing demand for electric vehicles and other aspects of environmentally benign “green” technology builds demand for rare earths. Mr Dawes noted that “BHP Billiton and BP are forecasting that there will be 140 million and 100 million electric vehicles by 2035, respectively, versus around 1 million today. This would require multiple new sources of rare earths supply to meet demand. Similarly, a European Union report recently concluded that the European Union is vulnerable to supply bottlenecks of rare earths used in electric vehicles and wind power, more so than, for example, lithium."
• The company has also announced the appointment of financial public relations and investor relations consultant, Blytheweigh, for an initial term of 6 months commencing today. Blythewigh represent a number of small to mid-cap listed companies including a number within the mining sector where they have developed experise and networks, including an assocaition with Camborne School of Mines.
Conclusion: The company’s work programme is stepping up following the agreement with Noble Resources and having an additional communications channel in place with Blytheweigh should help to ensure the effective dissemination of the results while also enabling the key management team to concentrate on advancing the projects.
*SP Angel acts as Nomad and Broker to Mkango Resources
Thor Mining (LON:THR) 0.8 pence, Mkt Cap £2.8m – Resource drilling at Pilot Mountain
• Thor Mining reports that it has started a drilling programme at its wholly owned Pilot Mountain tungsten project in Nevada. Pilot Mountain is located approximately 200 km south of Reno.
• The work entails drilling 8 new reverse-circulation (RC) holes to validate selected drilling results from a programme conducted by Union Carbide Corporation during the 1970s. Union Carbide “conducted detailed exploration and feasibility activities until, following a global downturn in the tungsten industry in the 1980s, they suspended further work”. The company also plans a further 6 RC drill holes to investigate possible extensions of the Garnet deposit.
• The Union Carbide work included a 13.9m wide down hole intersection at an average grade of 0.89% tungsten trioxide from a depth of 198m in hole DSDD015 and a copper rich intersection of 17.5m at an average grade of 1.8% copper and 2.2% zinc from a depth of 196m in the same hole.
• The main, Desert Scheelite deposit already has a JORC (2012) compliant indicated and inferred resource of 6.79mt at an average grade of 0.31% tungsten trioxide and 22.8g/t silver and 0.17% copper. Approximately 90% of the tungsten resource id classed as indicated.
• The new programme is aimed at both adding to the existing resource and to “to test for potential extension of high grade mineralisation at the eastern end of the Desert Scheelite resource, which, if successful, could result in the re-classification of that deposit as a significant tungsten and copper deposit."
Conclusion: Drilling of the Pilot Mountain tungsten deposit may add to increased resources of what is a relatively well known historic tungsten project. Benchmark ammonium paratungstate prices have picked up slightly to US$198/207 per mtu (metric tonne unit) and many tungsten producers and developers may be hoping that prices do not again sink below the US$200/mtu level.